Crown Cork & Seal

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Transcript of Crown Cork & Seal

Crown Cork & SealCompany introductionCore business

SWOTStrengthsMetal forming and FabricationHigh quality - Low cost ApproachCustomer driven attitudeStrong position in 2 piece operationsWeaknessesRelatively small manufacturer (ex.5)Deeply rooted in traditional philosophyStay away of innovations (research, products, materials)OpportunitiesChance to acquire part of ContinentalOverseas BusinessesDiversifying radicallyNew Raw Materials (Glass, Plastic)ThreatsConsolidation - Vertical integration among customers (ex.1)Strategic position of Reynolds MetalsRising competence on IndustryOthers competitors are already diversified New Raw Materials (Glass, Plastic)Pros and cons analysis of plastic and glassTo go or not go for the growing opportunities in plastic closure and containers, as well as glass containersAcquire the Continental can companyBuy all of the Continental Can businessAlternatives and Decisions that Avery was facingPast History and strategy of Crown Cork & SealAny Questions or Comments?Thank you for your attentionDuvernois, ThomasGonzalez, Carlos EPesa, OriolWang, DanGroup 5Porter's ForcesRivalry among existing CompetitorsSubstitute ProductsAluminum has replaced steel There are two materials that could seriously threat the use of aluminum:Potential CompetitorsPower of CustomersSome big brands among the customers (Coca-Cola, Pepsi Co.) Those customers maintain relations with more than one provider.Manufacturing need to be relatively close (geographically) to the customers. Some customers are establishing "captive" production of the cans (mainly brewers).Vertical Integration (really dangerous)Power of SuppliersThere are being some changes in the trends of the materials demandedThe aggregation level in the supply offer is high. (HHI: 2125) Only three main aluminum suppliers collect 65% of market share:- American National Can (25%)- Continental Can (18%)- Reynolds Metals (7%)- Crown Cork & Seal (7%) - Ball Corporation (4%)- Others (100companies) (39%)(market share)Rivalry among players is increasing. Strong Competition (HHI: 1063)Operations margins have decreased (from 7% to 4%)Five main Players: There are some entry barriers that in principle should dissuade potential competitors to get into the industryHigh entry costs (expensive machinery)Fierce intern competition makes the industry to lose appeal (Van Dorn Company and Heekin Can are strong competitors regionally)- Alcan Aluminum- ALCOA- Reynolds Metals* exhibit 3- Glass (21%): Mainly employed in the brewery sector In addition, Brewer companies are developing captive can production- Plastic (18%): Could be a big player if some problems are solved* exhibit 5* exhibit 1Pros:Getting more market shareLight weight & Convenient Handling

Cons:Not completed loop of recycleAllowed carbonation to escape in less than 4 months

Situation:

Slow growth and industry decline in metal containers in the 1900s Plastics continue to grow due to the characteristics of light weight and convenient handling The cost advantage of glass due to consistently declining resin pricesContinuing margin squeeze in metal containersCompetitors had aggressively expanded in a variety of directions

Pros:Getting more market shareExpansion in world wideIncreasing the productivityGetting plastic container line manufacturing from Continental canIncreasing bargaining power against from supplier and customer because of the larger market share

Cons:Acquiring conflict in cultureCapital structure to very high levelsDiversified customer base in various countries, demands, different packaging preferences and standards lead to higher operating costOpportunities: Crown will be co-equal leader in the world with American National. Challenges:Can Crown take enough cost out of Continental to develop a competitive advantage or will the acquisition of Continental destroy Crown's efficiency? The European operation is large ($1.5 billion in sales), manpower intensive (10,000 workers), and runs head to head with American National. Pass on the European Operation and Consider the Remaining Parts Acquire Continental Canada PartOpportunities:Make Crown be the leading supplier of all types of cans in CanadaPrevent American National from consolidating Canada to their advantage